Following the introduction of the Agency Workers Regulations, many companies initially chose the Pay Comparator option, either because it seemed like the simplest option at the time or because a client expressed a preference for that particular method. Months down the line however, it has become increasingly apparent how much work is involved in maintaining the pay parity between contractors and comparable workers. Not only that but there is the added concern that if each individual calculation is not done correctly, the company could face an equal pay claim which will take valuable time and considerable funds to defend.
Under the terms of the Agency Workers Regulations legislation the pay comparator information is not required provided that the individual worker is employed under a full employment contract which includes a provision for pay between assignments. All ContractorUmbrella employees work under such a contract which means that, when you work with us, you will have no obligation to obtain pay comparator information, you will not need to constantly adjust your margins and you will not be at risk from contractors making equal pay claims.
The introduction of the Agency Workers Regulations meant few changes for ContractorUmbrella as, like all compliant umbrella companies; we have operated an overarching contract of employment for some years in order to comply with HMR&C requirements. The components of an overarching employment contract are the same as those required under section 10 of the AWR, significantly the obligation to continue to make salary payments even when the individual employee is not on assignment. (The requirement for pay between assignments stemmed from opinion at HMR&C that was based on the legal case of Clarke v Oxfordshire Health Authority http://www.hmrc.gov.uk/manuals/esmmanual/ESM7190.htm).
The Swedish Derogation Model is therefore, in reality, nothing more than an overarching contract of employment, with the addition of a clause that waives the rights of the individual to equal pay under section 5 of the legislation. Over the last few years ContractorUmbrella has had a contract of employment in place which provides a salary based on minimum wage (which we pay out monthly regardless of whether or not we have received funds from the agency) plus a potential profit related bonus; this will not change post AWR as the business model meets the requirements to be compliant with section 10 of the legislation.
Ultimately the consideration for PBA was made under section 10 of the AWR because the government recognised the SDM as a truly viable option. All other equal treatment provisions under the AWR remain the same through a SDM umbrella but is far, far less time consuming to administer than the pay comparator model.
Beware of umbrella companies operating deducted PBA from their employees and disguising it as ‘employment costs’ to repay between assignments or paying it ‘rolled-up’. This means the individual is effectively funding PBA from their own money and the practice is unlikely to be considered within the spirit of the AWR by HMR&C. ContractorUmbrella funds PBA itself and won’t pass these costs onto our employees or the companies we work with.
ContractorUmbrella has retained the services of top employment solicitors, Blake Morgan, to ensure that our processes and procedures are entirely compliant with the AWR. If you would like to discuss putting your workers under our SDM umbrella company you can contact one of our expert advisors on 01206 713 680 or email us at firstname.lastname@example.org.